Barry Choi is true personal finance machine. He’s the prolific blogger behind the Money We Have blog, a self-directed investor and a collaborator on many specialized websites such as MoneySense, RateHub and more. He’s also an avid traveler and he’s accomplishing all this while holding a full time production job at City TV. I reached out to him to find out how he came to be so knowledgeable about finance without studying it at university or elsewhere. In the video, I ask him a bunch of personal questions about his bank account and personal investments. You can read the transcription of our chat below.
How did you fall into personal finance? What was the trigger that brought you into this space?
I was always good with my money from a young age. My parents were immigrants to Canada and they taught me the value of savings. When I got my first full time job, I naturally started investing. And when I say investing, I mean investing in my retirement, which was mainly investing in mutual funds at the time. As far as blogging about personal finance is concerned, it took me a little longer time to start. I started to invest in mutual funds and eventually I went to see a financial advisor. But later on, I realized that he was kind of ripping me off, because of the high MER [Management Expense Ratio] and the different sales charges that were involved. So, I started to blog because I wanted people to learn from my mistakes.
“I realized that [my advisor] was kind of ripping me off… So I started to blog because I wanted people to learn from my mistakes.”
You just said your advisor was ripping you off… Was he selling you mutual funds with high fees, like many advisors are doing, or did he do something that was really unethical?
In hindsight, my perception is a little bit different. I understand today that, if you’re going to buy a mutual fund, there’s going to be a fee. You hit it bang on when you say unethical.
This happened 8 or 9 years ago. At the time, I was thinking about buying a home. My advisors invested me in these mutual funds and I didn’t understand what a Management Expense Ratio was, or a deferred sales charge. At the time, I was happy to recommend this advisor to anyone. I was saying this guy is not charging me anything, it’s great! I talked about him on RedFlagDeal. And this random stranger messaged me and told me : “You are definitely paying something.” And he explained me what a MER was and what a DSC [Deferred Sales Charge] was.
When I looked into it, he was absolutely correct. I was paying a MER of 2,5%, which would have been fine, if it had been disclosed to me. More importantly, I had been charged a deferred sales charge for the funds that I had. I already told this advisor that I was planning to buy a home and, at the time, I was about to get married. So he kind of knew that I would need my money in relatively short time of about two years. And he had this in writing.
“This random stranger messaged me and told me: ‘You are definitely paying something.” […] When I looked into it, he was absolutely correct.”
Now, if you know anything about asset allocation and risk tolerance, as I’m sure you do, it was odd in this situation to have funds that had about 70% equities. So, when I called him on it, he basically said that if I was not happy with the returns, he could put me in something less risky, which had nothing to do with my question. Eventually, I had to escalate it to the management team, where fortunately, they ruled in favour of my cases and refunded all my fees back and I transferred all my funds out of this company.
Wow. Just so everyone listening understands, the fact that you were looking to buy a house, made you, at least momentarily, a “risk averse investor”. Because you were going to withdraw your money in less than two years, any stock market loss could have become permanent for you, because you would not have the luxury to wait that the stock market goes up again. Does this describe your situation?
Yes. As a personal finance blogger, I understand why people struggle with things like that, because at the time, I had no idea what risk tolerance was. When I talk to a lot of people, I get questions like that often. For example : “I’m buying a house in two years, the savings account are only paying 2% right now. How can I get a better return with zero risk?” It’s a joke for people who work in personal finance, because there are no such things. If someone promises you 10% or 50 % with zero risk, it’s a scam!
So, since you left this advisor, are you managing your money yourself?
Because I found out he was not being truthful about the fees, I started to do my research. I quickly realised that, investing, depending on how you invest, is not very difficult. I now invest in index funds. As many people know, it’s very simple way of investing. And realistically, I spend 5 to 10 hours a year on it, total. It took me about 20 to 30 hours to research it at the beginning, Overall, it’s not a huge time investment. And if you do the math, doing this will save me tens of thousands, if not hundred of thousands, over the course of my 40 years of savings.
“I quickly realized that investing… is not very difficult. I now invest in index funds. As many people know, it’s a very simple way of investing.”
I know you are a very smart guy and you made it your passion, so I know that you’re doing well. But at the beginning, did you do any rookie mistakes as a self directed investor?
There is always mistakes to be made. I should mention the popular blog Canadian Couch Potato. There is a reason they suggest a model portfolio. The thing is, anyone who is smart and excited at the beginning, thinks they can do better, myself included. For example, I’m going to change this asset allocation, I’m going to add an ETF or something else, to get more exposure to this. I remember at the times, the BRIC countries were very popular. Brazil, Russia, India and China. It did very well for quite a few years, but in the last few years, it did not do so well. Basically, a lot of people are trying to time the market, and that’s the biggest rookie mistake anyone can make. I’ve bought some things that I had read about in the newspaper that had, realistically speaking, no purpose in my portfolio.
“Basically, a lot of people are trying to time the market and that’s the biggest rookie mistake anyone can make.”
In fact, just last week, I finally sold a position I had in a Canadian Preferred Index fund. I held it because it had an attractive dividend; that was I read online. What they don’t tell you is that the overall value of the ETF can still drop. Even though I was getting a great divided every month, I still lost about 25% over the last two years.
I think that you invest mostly in ETFs, but do you own any individual stocks?
When I started to invest, I owned individual stocks of companies in finance, energy and telecom. It came down to how much time I was willing to invest in this. I found that I was just spending too much time reading about stocks, and it was not something I really enjoyed. Although I enjoy managing my money, I prefer using ETFs and TD E-series, just because it was so much easier to invest, and allowed me to do other things I enjoyed.
What are those other things you enjoy?
Now, I’m a freelance writer. So, I write, I blog and I like to travel. Or it can be something as simple as watching TV at home. Maybe it’s true, maybe I could pick a winner stock, and hit it rich. But there is just as much chance as taking a loss. I’d rather just get the average return, and be happy knowing that, since my savings ratio high, I’m going to be fine with my retirement.
So, what is your savings ratio?
I haven’t calculated it since I bought my condo, but before that, it was over 50%. It’s easy for me to say that, because I’ve been raised with good savings habits and I probably have an above average salary. I always had the discipline to pay myself first. That’s what I think is the most important.
You deserve some credit here. No matter how much they earn, people tend to spend most of what they make. And I’m no exception. When I had a better salary last year, it was as hard to save money as when I was making two time less. It’s always hard.
It is tricky. This why I always pay myself first. Regardless of what my pay is, I always save 25% right away. I started at 10% at the very beginning, because I was not making much money. It’s mainly a lifestyle thing. I always recommend people to up their savings every single time they start making more money. When I got a raise in my mid-twenties, I actually upped my savings at the same rate than my raise, so my savings increase but my lifestyle expenses did not.
“I always save 25% [of my paycheck] right away. I started at 10% at the very beginning because I was not making much money.”
After you decided to manage your money yourself, did you instantly go into personal finance blogging?
Becoming a DIY investor was just a natural step. It was thanks to that random stranger who messaged me, that was actually a financial planner from Edmonton. His name is Markus Muse and he is a good friend, and it helps that there are a lot of good people out there that are willing to help. I had more times 3 years ago and I began to blog about personal finance, essentially for my friends, that were always asking me the same questions. I just wrote a post about it and sent them a link. Eventually, it grew into a business. It helped that I have a formal journalistic background. Eventually, people asked me to write about finance as a freelancer.
How did you went from being a newbie with no finance background to a personal finance expert? How did you do it?
The nice things about being an investor, is that you don’t need to know everything. I index investing, which is a passive way of investing where you can invest in entire markets. Fortunately, there are a lot of good resources out there. I started with some basic books to get started. The Millionaire Teacher is one of my favourite. The Wealthy Barber is also great . What you will notice in these books, is that they all have similar themes, and they tell you how to invest if you are a lazy investor. In reality, I’m a little bit lazy, so it’s easy for me. After reading all these resource, you realize that it’s not that hard. I set up the account, I automate deposits and I rebalance every year.
“The nice thing about being an investor is that you don’t need to know everything.”
Thank you so much Barry. Just before wrapping it up, I wanted to ask you a question that is quite personal, but I don’t want you to get angry or anything. Since the mission of Hardbacon is breaking the taboo of money, I wanted to ask you, how much did you make last year?
I make above the average Canadian, but it’s also because I have a my full time job and two side hustle jobs. So, how much I make every year depends of how hard I work.